The Narongdej family is exiting its long-time core business of auto parts by selling its 57-per-cent stake in KPN Automotive Plc to Aapico Hitech Plc for about Bt1.03 billion.

KPN Group CEO Kris Narongdej said yesterday his family had inked a memorandum of understanding with Aapico Hitech to sell its holding in KPN Automotive for Bt18 per share.

The family, however, has a condition to buy back KPN Warehouse and KPN Logistics from Aapico Hitech for a combined Bt170 million, a buyback which is expected to be completed by the end of the year.

"Mergers and acquisitions have set a trend in the auto industry," Kris said. "It is a natural process. When we talk about mergers, there are only two choices - buyer or seller - but we are the seller this time. The talks took place two weeks ago."

Aapico Hitech will launch a tender offer for the remaining shares in KPN Automotive after due diligence is completed and both firms receive approval from shareholders. The deal is expected to be finalised in early February, after which KPN Automotive stock will be delisted from the stock market.

Korn Narongdej, the younger brother of Krit and KPN Automotive's major shareholder, said the company contributed about a half of his family's income. Other family businesses are a music academy, entertainment, human-resource training and real estate.

"The deal was decided by the family members," he said.

Khunying Phornthip Narongdej, the mother of Kris and Korn, set up the KPN Group, of which KPN Automotive is the flagship, after she left Siam Motors Group - founded by her father, Thavorn Pornprapha - to take charge of the Nissan car dealership in Thailand.

Ahead of the formation of the KPN Group, she headed Siam Yamaha, the local maker and distributor of Yamaha motorcycles.

Aapico Hitech president and CEO Yeap Swee Chuan said the deal had been struck as the Narongdej family has the same philosophy as Aapico - that business consolidation in auto parts is one of the best ways to remain competitive in the global market.

"As we have already started our forging operations in Kunshan and Shanghai, we will utilise KPN's know-how and expertise in the forging business to further enhance our technicians' skills in China," he said. "In addition, Aapico Hitech and KPN Automotive share a similar customer base, such as Ford, Honda, Mazda and Toyota, and therefore a good synergy already exists."

Aapico Hitech is a manufacturer of car assembly jigs and dies and original-equipment-manufacturer auto parts. Its products include steel fuel tanks, pickup truck chassis frames, forging parts, car navigation systems - as well as car dealerships.

KPN Automotive operates three businesses: forging, plastics, and logistics and warehousing.

Aapico Hitech will use both internal cash and borrowing from financial institutions to finance the deal, Yeap said. His firm's debt-to-equity ratio would be about 0.4-0.5 times as a result.

He forecast that Aapico Hitech's revenues next year would jump from about Bt8 billion to Bt11 billion after consolidation with KPN Automotive.

"We are still small players, so we remain looking for an opportunities to take over other companies related to the auto industry," he said. "We don't want to compete with the Japanese, US and European auto industries, but we look at China, India, Malaysia and Thailand. We want to be the strongest in Asia."

The company now has a presence in China, India and Malaysia, in addition to Thailand.

Stock of Aapico Hitech yesterday surged 11.86 per cent to close at Bt19.80, while that of KPN Automotive rose 0.58 per cent to Bt17.30.

Kongkiat Opaswongkarn, CEO of Asia Plus Securities - the deal's financial adviser - said the consolidation would strengthen Aapico Hitech's competitiveness, increase the company's product's range, enlarge its customer base, and enhance its expertise in forging and the production of larger plastic parts.

Oranan Paweewun

The Nation